What do you wish the people you follow did more or less of online?
SM: Learn about spelling and grammar. Writing is now so essential to our lives online, and sometimes it’s the only thing people see of us.
Steve Martin nails it. Could not agree more.
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"Read the reviews."
Read the reviews.
Do as the man says. Worth it.
Krugman parses Larry Summers recent IMF talk, and finds at the core the hard paradoxes of the postnormal: Secular Stagnation, where the liquidity trap inverts the order of the economic universe.
If you take a secular stagnation view seriously, it has some radical implications – and Larry goes there.
Currently, even policymakers who are willing to concede that the liquidity trap makes nonsense of conventional notions of policy prudence are busy preparing for the time when normality returns. This means that they are preoccupied with the idea that they must act now to head off future crises. Yet this crisis isn’t over – and as Larry says, “Most of what would be done under the aegis of preventing a future crisis would be counterproductive.”
He goes on to say that the officially respectable policy agenda involves “doing less with monetary policy than was done before and doing less with fiscal policy than was done before,” even though the economy remains deeply depressed. And he says, a bit fuzzily but bravely all the same, that even improved financial regulation is not necessarily a good thing – that it may discourage irresponsible lending and borrowing at a time when more spending of any kind is good for the economy.
Amazing stuff – and if we really are looking at secular stagnation, he’s right.
Of course, the underlying problem in all of this is simply that real interest rates are too high. But, you say, they’re negative – zero nominal rates minus at least some expected inflation. To which the answer is, so? If the market wants a strongly negative real interest rate, we’ll have persistent problems until we find a way to deliver such a rate.
One way to get there would be to reconstruct our whole monetary system – say, eliminate paper money and pay negative interest rates on deposits. Another way would be to take advantage of the next boom – whether it’s a bubble or driven by expansionary fiscal policy – to push inflation substantially higher, and keep it there. Or maybe, possibly, we could go theKrugman 1998/Abe 2013 route of pushing up inflation through the sheer power of self-fulfilling expectations.
Any such suggestions are, of course, met with outrage. How dare anyone suggest that virtuous individuals, people who are prudent and save for the future, face expropriation? How can you suggest steadily eroding their savings either through inflation or through negative interest rates? It’s tyranny!
But in a liquidity trap saving may be a personal virtue, but it’s a social vice. And in an economy facing secular stagnation, this isn’t just a temporary state of affairs, it’s the norm. Assuring people that they can get a positive rate of return on safe assets means promising them something the market doesn’t want to deliver – it’s like farm price supports, except for rentiers.
Oh, and one last point. If we’re going to have persistently negative real interest rates along with at least somewhat positive overall economic growth, the panic over public debt looks even more foolish than people like me have been saying: servicing the debt in the sense of stabilizing the ratio of debt to GDP has no cost, in fact negative cost.
I could go on, but by now I hope you’ve gotten the point. What Larry did at the IMF wasn’t just give an interesting speech. He laid down what amounts to a very radical manifesto. And I very much fear that he may be right.
Important considerations. Read.
Would be funny if Biden were to fly Air Force Two through the ID zone next week.